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tv   Worldwide Exchange  CNBC  March 2, 2012 4:00am-6:00am EST

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brought to you live interest l london, singapore, are and around the world. this is "worldwide exchange." welcome to the final program of the week. the headlines from around the globe, banks in europe top a record 770 billion euros despite mario draghi's insistence the liquidity offer is flowing into the real economy. japan's january cpi data shows the world's third largest economy is still stuck in deflation. the yen slips to a near nin nine-month low against the dollar. and eu leaders are set to sign a fiscal compact in brussels but cracks could emerge as soon as today when spain
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presents its 2012 deficit targets. and in the u.s. treasury secretary timothy geithner goes on the defense saying critics of financial reforms and bailouts are suffering from financial crisis amnesia. cnbc's "worldwide exchange," christine tan, i'm ross westgate. jackie deangelis will join us later. spain's unemployment rate up by 2.4% in february for the seventh month running with the numbers of job seekers hitting 4.7 million. the unemployment rate is now the highest in the eurozone. the new government led by conservative leader has been pushing for looser fiscal targets but eurozone officials have not offered any leeway on deficit goals. according to media reports spain may present a 2012 budget based on a deficit target of up to 5.5% of gdp compared to the 4.4%
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agreed with brussels. the austerity versus growth dichotomy has topped the agenda at the summit which kicked off last night in the belgian capital. leaders have gone back to ways of promoting economic expansion in the region for the first time in two years. silvia has once again been pushing the all-nighter. it was nice to have a summit that wasn't crucial, wasn't an emergency, wasn't there to stop the world falling apart. so this morning we learn, i guess, we're not going to give the greeks all the mopey but one wonders how much of a north/south divide there is on growth. >> reporter: it seemed to be a very contemptuous summit. we've had others where people weren't even talking to each other anymore or shaking hands.
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it's not like that. the greece thing, no big surprises in there. it will be released piece meal. they have sort of the agreement that the $130 billion are going to flow and now it will be as needed. the bid for the psi, for recapitalizing the bank, and as we go along, as the psi deal hopefully goes through the rest of the money will flow bit by bit. no big surprises there and no sort of big controversy. no controversy, also, about the growth idea. the idea that we're slightly out of panic mode. we signed the fiscal compact which is basically the austerity solidarity pact, so to speak, that the budget discipline impact, that 25 out of the 27 su nations have signed, the eurozone plus eight. that's already a success although you know the eurozone would have liked everybody onboard, the uk and the czech
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republic for the time being not onboard. so we'll have to wait and see about that. and now yesterday a lot more talk about growth. but, also, a lot of singing from the same engine say we can't fall back into the old deficit trap. we can't fall back into the old eu trap signing grand statements about deficit discipline and after that go and spend galore. how on earth they're going to put the two together, of course, is a different question. you just mentioned the spanish unemployment numbers. unemployment clearly a big problem in many countries and talk about deficit reduction, the dutch, the netherlands, from the german hard core austerity camp, they're not going to meet or very likely not going to meet the deficit targets. they're going to have a deficit overshoot of 4.5%, above the 3% they should reach so it's not something is that's only in graes or only in spain. >> all right, silvia, for now thank you very much indeed for
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that. let's bring in for the first hour today the senior investment k columnist at "the financial times." at the moment, john, markets have sort of been rallying on, i guess, big liquidity injections. when will the subpar growth rates in the peripheral come to weigh? >> when will they begin to weigh on the markets is when the supply of easy money clearly dries up and that's unclear when the moment is going to come because you have central banks around the world currently playing from the same script. it was interesting on wednesday that ben bernanke's comments were received the way they were. and it's also interesting -- >> negatively? >> exactly. the mere mention of oil prices, even though he mentioned them in the context of saying he didn't
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think they would be that much of a problem that the inflation effects would be transitory, still created a buzz of concern. similarly it was interesting that the rower off color economic data from the u.s. yesterday were almost positively received because that, again, gave us more hope of qe3. >> are we addicted to sort of liquidity injections? and if you don't think you're going to get one, we get nervous. >> i think -- i mean, the liquidity support by the central banks was needed given the risk involved. however, this does buy you time to do the proper reforms both on the fiscal side and on the structure side. and it's not really a free lunch. when you go back to crisis episodes, you always see fund ing is a key reason for that.
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you need to use the time properly to do the reforms to atres the causes that led to this in the first place. >> how much time have we bought for europe to deal with the problems -- the trouble is we're talking about fundamental imbalances here and that takes a lot of time. can we buy that amount of time? >> absolutely. that's my main concern. when you look at successful in the past, growth was a key element and when you think where will growth come, they realize that it's a very difficult issues. when you try to have a devaluation and the truth is it comes with exceptional filer are very close economies and structural reforms to open them up take a lot of time. >> which all adds up to this very awkward issue of what exactly we do about the currency. it's hard to boost competitiveness without
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devaluation and the current dynamics are against that. qe3 would not help the concern of helping a cheaper euro. >> absolutely. when you look it at the last decade with competitiveness in the periphery countries entering the euro, half was because the euro was just too strong and the euro remains very strong for the economy and very likely so because the fed is trying to keep the dollar weak. >> the story is sold by the germans, the dutch, and the finns that they are bailing out nations which in the case of spain isn't true, is it, john? they were running surpluses and it's because they had to bail out their banks to some degree. >> they were the ones that indulged in the profit -- exactly but it has nothing to do with the government the austerity or lack of it. there is an intereurozone
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version of the global imbalances, interest rates appropriate for germany through the last decade were wildly inappropriate for the periphery in both directionses and that is the core of the issue. greece, i think, is ever more seen as a bit of a separate case. if you look at spain, those arguments just don't apply. >> absolutely. you see that monetary policy was too loose before the crisis. now it is too tight. if they have their own monetary policy, much lower policy rate and a much more loose policy at this point. >> okay. christine? >> gentlemen, what you have argued is it makes more sense for greece to leave the eurozone because they have more control over their currency. they have more control over their destiny. is that something you are alluding to? >> no, i would strongly disagree with that.
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actually when we look at past episodes of -- you see that in order to stabilize the new currency, you need the same reforms that greece has failed to do so far. if they add the euro with the same structures as today and after failing to reduce the deficit there is very high risk that any competitiveness gains will be only temporary and in greece you will have economic instability. and so the euro itself is for greece. a weaker euro would have helped. but in this situation that greece lacks policy credibility, the suggestion would be much worse than today. >> okay. stick around. let's update where we are with the global markets right now. christine? markets here, ross, essentially higher. we had the bullish sentiment from the ecb earlier on this week and that eased concerns of
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higher prices. the nikkei 225 is is up 0.27% but not touching the key level. we had cpi data today showing that cpi prices continue to fall. the country still stuck in deflation. markets are ignoring those, pushing hard because of the softer yen. topix up. the shanghai market up 1.4%. a strong start there. we had, of course, a strong session. bank developers getting a lift after china said state-owned banks will lend more to developers and speed up loan approvals. that seems to be taken as a positive signal. the hang seng is up. the gains were kind of capped because everybody there is watching the critical mpc meeting coming up on monday. they don't say anything about reforms or leadership change. that seems to be the focus 0 over in hong kong. elsewhere the kospi is up marginally but still some bullish sentiment about the ecb injection. hopes the injection will kind of
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ease all these crunches in the credit markets. n new zealand 50 up 1.3. a good session there. sensex trading to the up side. bear in mind a couple minutes ago it was trading to the down side so thousand everything is higher today on a friday. ross, what does your heat map show? >> an hour and ten minutes into the trading session, 5-4 advancers outpace decliners. solid gains by the end of play yesterday. the ftse 100 up. right now it's pretty flat. xetra dax is flat after yesterday. the cac is up just six points. we seem to be going quietly into the weekend. what we have seen, though, is continuing downward pressure on the core yields. the ten year 4.89%. the second ten-year gilt, the ten-year spanish yield below 5%. 4.9%. we've seen a real closing up of the gap between italian and spanish spreads. the key thing as well in terms
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of italy we saw the two year yield below the psychological 2% for the first time, 1.81%, first time in 15 months, that funding helping that. also record amount deposits just over 750 euro. as far as brent is concerned, dramatic moves in the last 24 hours. we hit $128 in the late trade. iran ran reports of a saudi fired pipeline. they denied that so we saw oil trading at $124.79. you see the sharp spike higher. nymex is at $108.09. a similar spike up during the session overnight. christine? hey, ross, well of course talking about japan's economy.
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they're still apparently mired in deflation. we had cpi data in the world's third largest economy dropping while household spending fell more than expected in january. meanwhile, the jobless rate ticked higher. they do not believe pumping more money into the banking system is enough to push prices up. the yen slipped against the green back following the news. the yen now hovering at nine-month lows. euro/yen and how that is stacking up, moving higher 108.12. so still with us, of course, our guest hosts, thanos vamvakidis and john as well. we have all these bad, well, so-called negative data from japan. nothing really new. still mired in deflation. this is one kcountry that doesnt have to worry about higher oil prices, pushing oil prices up, is it? >> we're in a world the recession risks have declined.
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if anything, some are worried about inflation pressures. japan inflation risk, recession ri risk is inflation the yen. the rest of the world looks like japan. now the rest of the world is recovering. at least it is recovering. japan is dealing with the same problem and we're discussing whether the bank of japan will try to dive in further risk. this is putting downward pressures on the yen and this will continue with respect to key assets. >> it's interesting because japan has pumped so much liquidity into the system. it's still mired in deflation. are there any lessons the rest of the world can take from japan? john, your take. >> perhaps the lesson, the most immediate lesson is we shouldn't have treated the banking crisis the way we initially did in the states. there's plainly a risk. the biggest long-term risk from
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the ltros have said to have been a spectacular test in all they were meant to achieve to my surprise and to many others. the biggest risk is creating zombie banks. if we're forcing them effectively to gorge on sovereign debt to a great deal and the morally hazardous recipe of extremely cheap money for a long time, the risk that we create banks that are very similar to the banks that have stagnated in japan is very high. that being said, i think the recovery has been stronger than one would have expected over the last three years and that is because ben bernanke in particular is conscious of what happened in japan if something is going to go wrong with this recovery, it will at least not be a same repeat of the mistakes made this japan. it will be a different problem. >> interesting. thank you very much for that, john, thanos.
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a big slap. the ftc handed out a cease and desist order to the german sporting goods japanese unit saying it unlawfully pressured retailers to stop them from giving out discounts on rival reebok and easy tone sneakers. adidas is examining the details of the order and will respond accordingly. let's check adidas shares. i'm told we can't pull out the board but we'll keep those things monitored. easy tone, does that strike a chord with you? >> easy tone, was that one where you put -- >> the sneakers. >> i was thinking of slender tone, a slightly different thing, isn't it? >> yes, it's supposed to give you some sort of, you know -- yeah. tighten antone up your muscles or something. >> i'm working on that. i'm work iing on that, christin. we'll take a short break. still to come, record amounts much of the ecb overnight, 775 billion, just under, post the second is ltro this week.
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so will any of that money ever make it to the real economy? we'll talk about that as well as we head out to brussels as well from the summit.
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welcome back to "worldwide exchange." tr treasury secretary timothy geithner is defending measures he and the government took during the financial crisis n. a "wall street journal" co-op piece geithner mentioned late night phone calls from several panicked bank sceos. reforms like dodd frank could have helped limit damage to the economy if they existed back then. geithner claims critics are suffering from amnesia and have forgotten how closely the u.s. came to financial collapse. san francisco fed president john williams says it is encouraging the u.s. economy has been showing signs of improvement and there's a sense of optimism but he says the rebound has been anemic and further fed stimulus may be necessary if the economy stumbles.
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williams was a voter this year and says qe is definitely not off the table and buying more mortgage backed securities would be the best course of action. >> overnight deposits at the central bank jumped to an all-time high of 775 billion euros, a day after the second three-year liquidity operation. speaking in brussels, the ecb president mario draghi said the large number of banks that took part in the second liquidity 0 operation was a sign that lending flows to the region are improving. we see here 8.2 billion euros. they originally weren't going to do it. they say actually the stigma is gone, so we thought we'd take some cheap money and that may be an easy way to fund funding gaps in spain and portugal. is that what most of the money will be used for, for funding? >> it certainly appears that way
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and that's not necessarily a problem. it will obviously be very good if it actually went straight into the economy and stimulated growth but although nobody wants to say so in as many words, the l it tro operation has been about tail risk, eliminating tail risk, calming everybody down and yet again we use the phrase often enough, buying time, kicking the can further down. it's actually succeeded very well to that level. another point i would make in defense of it. i'm not wild about what the banks are doing but another point is look at the action. if you look at the survey from the end of last year on the verge of a very, very significant credit crunch. the first ltro did nothing to actually reverse that. you saw that loans to companies did reduce very slightly last month, but you have to think that without the ltro we would have gone into a very serious
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credit crunch at the beginning of this year and that would have been very you ugly, negative repercussions to the economy. to that extent you can say it's having a positive effect because it's averted even worse. >> how much lower can we push you we have btp below 5%. we have two below 2%. sort of a big position. banks can't be in two places. one in the ecb and the other short term government debt. so how long will that beneficial impact be for? >> i think we brought most of it to this point in the way the ltro is a negative and from now on the reform implementation because in addition to l it tro we did have governments but other implementation is ahead of them and very closely how this
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proceeds not only on the risk of size but the structure. >> and just one thing here. have we -- is there think danger here that what we've done with this money is given money to the weakest banks to buy the bonds of the weakest sovereign nations? >> we created doubles or something along that, yes, there is a danger of that. there is the point you can associate sarkozy but if you are a bank with very cheap funding to buy your own government's debt, there's very little reason not to do it because your own government defaults, you are probably going bust anyway. and so it becomes an irresistible offer but it becomes an offer that does -- it helps avoid a collapse by those banks but it makes them even more than they perhaps were already. >> there was a lot of pressure
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on the greek banks to buy sovereign debt. they did so and they were much more viable. so if you look back and say the ltro was a single bullet, if it doesn't, things will be much more so. >> thanks for that. good to have you on. john sticks around. also still to come, president putin has told reporters he is happy about recent protests against him but is assured he still has the people's vote as they get set to head to the polls on sunday. we'll be in moscow after this.
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this is "worldwide exchange." the headlines from around the grobe, banks in europe a record 77 billion euro despite mario draghi, the ecb president's insistence the liquidity is flowing into the economy. japan's january cpi data showing the third largest economy is still stuck in deflation. the yen slips to a nine-month low against the dollar. and putin assures he has support of the majority of voters despite recent upriceings. and treasury secretary
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timothy geithner goes on the offense saying critics of financial reforms and bailouts are suffering from financial crisis amnesia. a parliamentary election which marks the first nationwide vote since june 2009. competition for more representation in parliament will be between supporters of the current president, mahmoud ahmadinejad, and those of the supreme leader ato la co-mkoco co-ayatollah khamenei. thank you for joining us. many of the reformist opponents are boycotting what they denounce as a sham election. also a crackdown on reformists. some will say this election doesn't matter but i guess, nevertheless, it will gauge where we are with the important internal politics. what do you think it's going to
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show? >> when you last interviewed me on this subject about almost two years ago i pointed out it was at that time at the height of the defensemen on 0 stragmonstr street, the point i raised at that time was that we have to look to see how the revolution is going to perform. what they can do in the next new year. now that we've come to the stage we have the first election since the last one, it seems that the military is quite uncertain. they are divided. although khamenei has the upper hand in terms of allegiance from the revolutionary guard, we should not write off ahmadinejad altogether because he also
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benefits from support from some sections of the revolutionary guard and also clearly tradition al and conservatives. so the importance of this election today is really internally to find out who has the upper hand, how they are divided. but, of course, taking into account that there's no independent sort of observer to decide what the actual counting of the votes would be. but to some extent it gives us some idea of the power especially the role of the mi military and revolutionary guards. >> and how are international tensions about the program filtering through into this? how significant is the supreme leader sort of putting himself out there to maybe take over negotiations with the west? >> if ayatollah ckhamenei gets the upper hand, we would see probably more tensions, less
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negotiation, morris lambic more islamic with the west. if ahmadinejad comes to power, they probably would try to find a channel because they are trying or they have been trying to gain the support of the 20% vote of the nationalists. you would probably see more moderate but not moderate in the sense of accepting all the rest the west wants. but more moderate relatively. >> hi. this ichristine. when you say they're likely to follow the chinese model of relaxation, which aspects are you talking about? >> i'm talking about economic investment pause, as you know,
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iran has been suffering hugely, economically. it needs investment from outside in order to boost its currency and various inflation devaluation of its currency, et cetera. so it's the chinese model in a sense of more economic relaxation rather than political. >> okay. and just for the election, if there's a very low turnout, which appears to be a possibility some reports have suggested, who does that help? does that damage ahmadinejad or does that strengthen the hand of the supreme leader? even if you get a low turnout, that doesn't mean they can't
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somehow officially manipulate the role that we have at least 65% turnout. but to answer your questions more directly, it's difficult because -- it's difficult to say because, as i said, for the last 30 years there has been for this time of elections there has been about a 60% turnout. 20% would normally vote the more traditionalist route. 20% would probably ahmadinejad. and there's 20% that we have to watch out. and if there's a low turnout, it may mean that ahmadinejad hasn't got that. as i said at the beginning, i
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think the important rule that we have to watch out is the military, the revolutionary guard, whose allegiance because there's a huge uncertainty and these are the people who control the security of aspects of iran's politics. >> i hope it's not another three years before we talk to you again. not only elections in iran, there's elections in russia. the presidential vote takes place on sunday. prime minister putin expected to return to presidency for a third term. rumors of corruption and voting persists, pressure is mounting to ensure fairness after months of protests that were unthinkable a decade ago. steve liesman has sent us this report from moscow. >> reporter: protesters in the streets, a level of government corruption even the president has said is out of control. but still, despite troubles as
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deep and severe as its winters, russia's overall economic position looks better than developed european nations teetering on the brink of recession. russia just completed two back-to-back years of growth above 4%. its 6% unemployment rate is among the lowest on the continent and 4% unemployment rate is a fraction of the hyper inflation that plagued the country in the '90s. russia's ourful leader vat mir putin is expected to win back the presidency in this weekend's election. many russians still praise him for leading them out of the chaos. at least some russians are not so sure. they want him to loosen up on the reins of power. while challenges to the political system are unlikely to lead to a russian spring, analysts say the long-term outlook is less certain. >> i have very real concerns about what happens maybe not three years out but five to ten years out or if the price of oil drops below $100 a barrel. >> reporter: with the price of oil still high, though, foreign
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currency keeps pouring into russia. at last report $24 billion trade surplus. but the problems are region, a country that sports a third of all europe's billionaires has yet to find a way to offer basic services to millions of its people, many of whom live in poverty. >> steve joins us now in moscow. steve, just like old times seeing you there. look, widely expected to win as your report suggests, what happens after that? he can't rule russia indefinitely and is the key test going to be how -- how do we think he's going to respond to these new movements? >> reporter: good questions, ross. he can rule for a long time. if he wins this term and does the next term, he will have rule russia longer than stalin. there's a fun or not so fun fact for you. there's two different ideas about how he will react to this.
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one is he has to change because the protests we've seen and the level of the protests it's regular people and the elite seem to be fed up with his regime to an extent that will have to change. the other concern, though, people have spoken out, are in fact for are retribution and putin making some really strong noises about the united states and about the protests basically saying they are not supporting russia. sort of saying it's a betrayal of russia. so people are bracing for the reaction that happens after this election. >> how important do you think its that he avoids a second round? there's a sense if he wins much more than 50% it would be dismissed as a manipulated election. is he going to pull out all the stops to win in the first round? >> it's interesting because i think the damage has been done. i think if he wins in the first round or wins in the second round, i think the damage has been done so i don't think that winning in the first round
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undoes that damage. i want to talk about the opposition. there's a good concept behind the opposition. their concerns seem to be real but there is no focus of the opposition. there is no leader. we were down about 1,000 miles south of moscow and we asked some people and they said not yet. so it's not a leader they are ready yet to get behind. the 0 opposition is not ready yet to take over but their concerns are real and they have some good support both in the country and among the elite. >> steve, this is christine in asia. we have a lot of experience in the emerging markets in asia. corruption is a problem. isn't this a problem so deep rooted it's really hard to solve? >> reporter: yeah, it really is. i have to tell you, i lived here for six years in the '90s and i've come back and talked to a bunch of the people who are still here from that time, and back then, by the way, it was
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bad. and now they tell me it's off the charts. let me just tell you a story from somebody i knew who was putting on a big exhibition here, an international exhibition spending millions of dollars. it was supposed to be 40,000 people here. three days before the exhibition the visit from the fire inspector told them this is not going to happen. don't have the correct permits. the fire inspector was asking for a $300,000 bribe. and that, by the way, is a low level bribe. >> steve, good to see you, my friend. we'll catch you later. thanks for that. looking fine there in moscow. let's just show you where we are with the european stocks as we head towards the session a little bit later. the ftse 100 is down. xetra dax is down. the ftse mib as well. that after some pretty good gains that we had yesterday. now bond yields to be to be pretty low. we saw the btps are firmly below 5% and we've seen spanish debt as well below that. two-year btps currently trading
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below 2% for the first time in around 15 months. christine? markets here in asia, a good session for our friday, ross. the ecb liquidity injection earlier in the week took away the concerns about high oil prices. a little bit of risk appetite in the markets this week. the nikkei 225 is up. we had data out today that showed cpi would continue to decline. the fourth consecutive month in a row. country still mired in inflation. investors are used to it. they're pushing the market higher. the topix is up. the kospi is up 0.2%. some support from the ecb injection. the sensex in india up. elsewhere, the australian market up. the banks were optimistic that any sort of injection in the market will actually help to ease some of the concerns in the credit markets. new zealand 50 up 1..4%. the hang seng is up 0.8%. the shanghai market up 1.4%.
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today banks and developers got the lift after the banking regulator said state owned banks will lend more to developers and speed up loan approval so on that note they are lifting higher. speaking of china next week we have the all critical chinese national people's congress and the chinese people's consultative congress. they will mark the final session and extensive economic reforms. bernie low explains further in this report for us. >> reporter: long speeches, ubiquitous applause, the top advisory body have been seen as rubber stamped meetings. they say it's still an important barometer for this move. >> the key area to pay attention to would be which signals are sent in terms of the leadership change. there needs to be an indication
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of hu jintao and the report, again, this would be an important part of the chinese to establish his legacy and that of hu jintao so look for any political reform. >> reporter: one reform being suggested is transforming chinese state-led economic model to focus on the private sector. according to a new report titled china 2030 by the world bank and a chinese government think tank. for this year in 2012, quelling public dissatisfaction likely to remain at the top of the agenda like affordable lending, tax cuts and stamping out corruption. >> the number one problem always is corruption. corruption creates immediate and direct anger. and here i'm actually very please d at the soft touch rathr than, bang, you know.
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>> reporter: there could be behind-the-scenes political jockeying. >> the recent excitement, the responsibilities and the face-off at the u.s. consulate. it's an example of political pressure bubbling up to the surface. >> reporter: for the outgoing administration, 2012 would be the last chance to be the legacy for the incoming leaders the meetings will help cement their position and set the scene for the power handover. well, of course this weekend beijing is widely expected to announce their country's 2012 military budget. china's neighbors and the u.s. will likely respond to washington's stronger focus on asia. sluggish wage growth, persistent deflation as japan nears the tsunami's anniversary. the latest economic signals aren't exactly uplifting.
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the data trigger to fall the yen to a nine-month low against the dollar. to tell us more, yukako ono. >> reporter: a string of data shows japan is still stuck in inflation and the recovery mode is slow. the consumer price index kept falling down 20.1% year on year. this is still far from the 1% goal the bank of japan set last month but with bo squ governor said global growth and reconstruction spending will help with economic recovery. in the near future rising oil prices could boost consumer prices. but not to expect the sevcentra bank to adjust policies hinting that is ultra easy monetary policies will continue for a while. earnings are keeping consumers from pulling out their wallets. the jobless rate grew 0.1 points to 4.6% in january while
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household spending shrank by 2.3%. that's all from the nikkei business report. back to you, christine. >> thank you very much for that. you have a good weekend. well, over in south korea, inflation eased for a second straight month to a 14-month low. to tell us more, rhie-young lim. >> reporter: debts stay in the 3% levels for two months in a row which is an improvement on last year held by pork and beef prices. i don't think the bok is going to make any drastic moves on the back of this because these figures don't incorporate the surge. south korea is heavily dependent on energy imports from overseas and that was the recent spike in crude prices consumers have been hit. retail gasoline prices surged to a record high again. just this afternoon they've been gaining for the last 57 days chls diesel priceses jumped 7.5%
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on year. these oil populations are reflect reflected after two to three months and cpi figures to pick up after march. separately hsbc purchasing managers index rose above the 50 mark for the first time since july 2011 adding home for a manufacturing recovery. back to you. >> rhie, thank you very much for that. live from south korea. ross, it's a friday. i think i might treat myself to a glass of wine. what do you think? >> it's funny you should do that. you have a choice whether you drink it or just put some money into the bottle. are you looking to add vintage to your portfolio? how you can diversify at the same time. 2009, all those vintages to be the best. what do we have to say about it? what does it mean for you?
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it's that time of the show when jackie joins us for the last hour. jackie, good to see you. do you like to invest in wine or drink it?
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>> i prefer to drink it, are ross. as a matter of fact, being that it's friday, when i leave for lunch, i'll probably have a glass of red with my lunch. >> an unprecedented 19 2009 bordeaux have received points from robert parker. views often set demand and price for the best bordeaux. this comes as wine investment has seen a pickup with a benchmark indicated for wine investments. rising 1.6% in february. that's after something of quite a fall last year. joining us for more is the senior broker. 19 wines rapted 100 points which i guess is the maximum from 2009 vintage. when was the last time we had that sort of number of wines rated that way? >> well, you have to go back and look at 1990, the 2005, and the
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2000 vintage as well all great, never added up to 19 in total. it makes it the greatest vintage. >> what's that then doing to prices? >> it's going to drive prices up. of course we're talking about huge demand for these wines. there are only 13,000 to 15,000 row produced. the collector's item will rise. >> a couple of well-known brands didn't get a $100 mark. those have been for the asian bordeaux. >> yes. and certainly lafitte was picked to be 100 points. it was given potential points. there were thoughts it was going to reach 100. it's been given a 99 plus. bearing in mind, of course, that robert parker's scoring system
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anything over 96 is extraordinary. >> it won't necessarily damage the investment value. >> i don't see it. there's a vintage that was a 98 point score trading at 21,000 pounds. you put it into context. >> let me ask the naive question. if there's that many more wines of that type quality, the higher supply of beer, shouldn't that be bad for price, there's so much of it out there. >> everyone has their own choice so you only have between 13,000 and 15,000 cases produced. it's not just coming from europe and america. it's coming from the emerging markets. in china alone there's almost a million millionaires.
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>> the play on the inequality or whatever you want to call it, the emerging class of very rich people in emerging markets is what's driving prices up. >> that is one of the factors. bear in mind that certainly with regards to china and in 2008 in hong kong opened the gates up. but this market's been around and we've been seeing double digit growth since the 1950s. >> jeremy, if i can just jum in here for a quick second y. is 2012 the best time to invest in wine? what is it about the vintages that make them really special? >> we just came off the back of the correction in the market. only the third in 25 years making the market very stable. but, like anything, when you have a correction, the prices will drop and it becomes a buyer's market again. it's attractive not just to
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investors but to people who like to drink the wine who may have been outpriced. we further down the line a treaty should be signed between the eu and the indian government dropping import duty down to 50%. that negates the indian market as well. quite simply it's the best time to buy into the market since 2009. >> jeremy, this is christine. you mentioned china. interestingly enough is becoming one of the world's largest wine consumeers in about 20 years. are chinese just pure drinkers or are they now starting to invest in wine as well? what's the trend like? >> they are starting to invest. there are the chinese who bought chateau in france. they have set up chateau? china as well but these are collector's items. initially very much brand related. the rich want to get hold of wine so they can use at parties and drink them automatically. i do see the investment side of
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things. this market is growing and growing, becoming mainstream globally so there will be investors all over the world. >> jeremy, thank you very much indeed for joining us. have vin-x. john, good to have you on today. thank you for joining us. john an uuthers. >> loved having you on the show today. we'll say good-bye to our asian audience. "worldwide exchange" continues in europe and the u.s. jackie, tell us what's coming up. thanks, christine. [ no audio ] stamps.com is the best. i don't have to leave my desk and get up and go to the post office anymore. there's nothing worse than going to the post office and waiting in line. [ male announcer ] with stamps.com, you can buy and print real u.s. postage for all your letters and packages so you'll never have to go to the post office again. they took a post office and sat it on my desk. it doesn't take up any room,
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good morning and welcome to the show. the headlines from around the globe this morning and the united states treasury secretary tim geithner goes on the defense saying critics of financial reforms and bailouts are suffering from financial crisis amnesia. >> banks in europe had 775 billion yeuros in the ecb. and over in japan january cpi data showing the third largest economy is still stuck in deflation. the yen slips to a near nine-month low against the dollar.
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you are watching "worldwide exchange" with christine tan, ross westgate. i'm jackie deangelis. great to have you with us this morning. let's take a look at the u.s. futures and see how we're setting up for trade on wall street. looks like it's point to go a lower open. the dow lower by 14.3. the nasdaq by 3.25. and the s&p 500 by 1.6 points and of course this was after a higher day, a higher close a little bit. yesterday we saw positive sentiment and perhaps, ross, some are say that go we overreacted to bernanke's comments the day before. >> yeah. it just shows you how skittish the markets are. we had good gains, up over a percent. this morning more muted. looks like we'll slide more quietly into the weekend. numbers out of italy, the gdp grew 4% in the whole of 2011. a relevant number looking at the negative figures in the last quarter. budget deficits 3.9% of gdp.
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public debt 120.1% gdp at the end of 2011. they also say they had a primary budget surplus in 2011 of 1% of gdp. so if you wipe out all the debt they could effectively live off their tax revenues. this is the latest bit of data as eurozone finance ministers have split greece's bailout, delaying the approval of more than half of the 130 billion euro loan. part of the fund to support the plan will be disbursed but a more details assessment of the country's reform plan before the remaining amount. at the same time spanish unemployment rate is up by 2.4% in february for the seventh month running hitting 4.7 hello. the unemployment rate is the highest in the eurozone. the new government led by conservative leader has been
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pushing for looser fiscal targets. eurozone officials have not offered any leeway on deficit goals. according to media reports spain may present a 2012 budget based on a deficit target of up to 5.5% of gdp compared to the 4.4% agreed with brussels. at the same time eu leaders have signed the region's fiscal treaty which sets those strict new limits on deficits and debt. joining us for more, the editor of reuters breaking news and also with us for the last hour of the program zane brown, partner of fixed income strategist at lloyd abbott. let's kick off with you first of all. spain has been arguing this summit and will keep arguing as their budgets suggest for looser if fiscal deficit targets. are they going to get more support from the rest of europe? particularly i'm guessing -- how crucial are the french elections in swinging the balance of the debate their way? >> i'm sure that the french
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elections will help because the socialist candidate for the frie french presidency has been talking about the need for having a growth aspect to complement this fiscal austerity treaty. but of course he's not going to be 0 in situ until may so we're talking two months or so. >> do you think it's a done deal he will get in? you just spent, what, three days there? >> i have. not a done deal but it looks pretty likely that he's going to be president. that said the spanish situation, and the way i see it, it's very, very difficult to resolve because you've got almost like the proverbial irresistible force and the immovable object. to go from 8.5% deficit which the spanish had last year to 4.4% this year, it's time when the economy is sh rinking when you have the terrible unemployment figures you mentioned in your introduction.
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on the other hand, the european commission, they've just agreed the so-called six pack, they have the new treaty that they've signed which doesn't yet come into operation but it's still there, and last thing they want to do is say it doesn't matter. all those rules don't matter. it's a terrible sort of dilemma. how do they resolve this? you would imagine some sort of fudge will be found. >> zane, in the meantime, of course, drunk on liquidity, a sharp fall in yield in both spain and italy. italian two-year btp is below 2% for the first time in about 15 months. spanish ten year debt below 5% as well. investors have to worry in the short term. when do they worry? when do they start worrying about the growth numbers? >> i think they always are going to worry about the growth
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numbers. certainly with a recession row jekted in europe most of this year, i think a lot of people -- a lot of investors are looking at europe saying, yeah, maybe not there, and if if we look at emerging markets, well, they're slowing down as well. the conclusion of a lot of investors is, hey, the u.s. at 2.5% growth doesn't look bad. >> zane, when we look at europe, some of the down side risk has been reduced. when you are weighing out the pluses and minuses on the scale, those down side risks we've taken off the table, are they being shrugged off by investors or are they significant? >> well, if they haven't been shrugged off, they need to be at least readdressed and reframed because, as you point out, a lot of those risks are off the table. there has been enormous amounts of liquidity provided and, of courts, in the process of providing liquidity, we've taken away the issue of bank financing and we've taken away lower yields in spain and italy the issue of inability of sovereigns to go out and finance.
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when you look at what bernanke sent to the congressional -- his congressional testimony ahead of time, all of his risks were europe related. now with the success of ltro 2, i think a lot of those can be dismissed. >> zane, hi. this is christine here in asia. certainly the sentiment here in asia is all this liquidity injection coming from central banks in the world is taking away the concerns about higher oil prices. do you share that view? >> no, i think higher oil prices is a separate issue and certainly if there's one thing that ought to keep investors awake at night it's what's going on in the middle east and independent of economic growth and what's being done to provide liquidity if you end up with substantially higher oil, all of a sudden we are concerned here the debt will impact growth and
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consumers' ability to go out and spend. it's got to have an even more dramatic impact elsewhere in the world where as we've said in europe you are really on the precipice of a recession. it could really cause people to contract pretty seriously. >> zane hugo, stick around. we'll talk more about the impact of ltro. we've seen record holdings of the ecb overnight. 77 billion euros. will any of that make its way to the real economy? are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind...
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good morning and welcome back to the show. time for the global markets reports. let's take a look at u.s. futures and see how we're poised for trade on wall street a. slightly lower open if the markets were to open now, the dow down by 6.3. the nasdaq down by 3 points and the s&p 500 just under the flat line there. and of course, ross, it's important to note we did see a little bit of a higher day in the u.s. yesterday. we saw the nasdaq and the s&p 500 hitting new highs. positive data out of the u.s. with those february vehicle sales and same store sales as well. we saw a little bit of the risk coming back on the table with the financials and the materials being the best performers. the only sector in the red the consumer staples.
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>> here right now, jackie, as far as stocks are concerned ahead of the open pretty flat. advancers and decliners fairly evenly matched. this comes after pretty strong gains in european markets, 1% plus gains. right now the ftse 100 down two points. the xetra dax is flat. the ftse mib up half of a percent. we focus, of course, on bond yields. getting the benefit of ltro, too. both italian and spanish ten-year debt firmly below the 5% mark at the moment as gilts go back up to 2.2%. we won't get any more qe and bunds here 1.84. what's significant as well how much money is flowing into the short end particularly in italy. we saw this happen yesterday. italian debt for the first time below 2% after 15 months it's moved further below the level down to 1.75%. this is where you're seeing the real impact of that money, the three-year italian debt, 2.5%.
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euro dollar fairly steady. still weaker, 1.3257. euro/yen still near the recent multimonth highs we've had. dollar yen this morning, that hit a fresh high that we haven't seen since may. curre currently 81.47. and just to remind you where we are with brent now, during the post close last night, late post sentiment brent with a number of 128. back down to 125.39. we had erroneous reports of fire. the nymex will show the sharp spike up late yesterday and nymex crude trading at 108.30. christine? asian bourses doing nicely today. coming from the ecb taking some of the concerns about higher oil prices today.
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largely ignoring data that showed the country dedlicliningr the fourth straight month. we had the banks and developers moving higher after the banking regulators said it was going to continue cheap loans, loans led to more developers and sped up approvals, that's giving a lift to this market. gains in hong kong were capped because of the meeting on monday. a lot of investors are waiting for reforms coming from the meeting. the kospi is up 0.2%. the australian market is up. new zealand 50 up. the sensex up 0.3%. overall for a friday, a pretty good session here in asia. that's it for me. i'll be back next week. of course we'll have details on the meeting that i talked about. the key national people's congress meeting and we'll be rolling out a special series on japan one year after the march 11th disaster.
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thanks, christine. have a great weekend. deposits have jumped to 780 billion euros the day after the central bank's three-year liquidity. the ecb president mario draghi said the large number of banks that took part in the second l it tro could be a sign that lending flows in the region will be improving soon or not as of last night. still with us is hugo dixon. we have seen this, again, i spoke about this sharp fall in yields particularly in spain and italy. here is the thing. is any of this money going to escape no the real economy? it's pretty clear when you see banks literally going to use it for funding gaps in spain and portugal and if you don't need it straight away you either park in short term debt or stick it with the ecb. >> yeah, look, i don't think you're going to see a big splurge in lending to the real
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economy but i think you've got to sort of compare it to what would have happened if you hadn't had this ltro without those operations what you would have had was a severe credit crunch so you would have had a contraction. what we're now going to get is sort of mild growth in credit in some countries, mild contraction in other countries. so it's sort of, you know, even stevens as far as the real economy is concerned. as you say, most of that money, a lot of it's been parked with the ecb. a lot stored up to repay debt that is maturing later in the year. but ultimately a lot of it will find its way into speculative assets of one form or another. >> you can create this virtues circle where confidence is returned to the debt market and so it returns elsewhere. >> well, this is a liquidity factor. if the money is there, it will find its way out into something.
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if it only a little bit is going into the economy, most will go into assets, into equities you talked about, the italian and spanish bonds. there's also oil we mentioned earlier in the program. a little of that oil rises to do with supply problems in the gulf, a little bit to do with the american economy is growing faster than expected but quite a lot is there's liquidity sloshing around. >> zane, we saw david yesterday, of course, if we -- there's this nervousness because bernanke suggested there was going to be no more liquidity in the states. have we become too much like liquidity junkies? we think it's going to be taken away. we don't get any more injections. >> well, certainly quantitative easing was the heroin that made us feel great about higher stock prices, improvement in the bond market and, i think you're right. that was the initial reaction the day before yesterday but i think people finally realized 24
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hours later that what bernanke was really saying is, hey, it may not be necessary. we may have enough job growth, enough lending growth here in the united states that maybe we don't need to do another round of qe2 and perhaps with help from ltro maybe some of the down side risks are less than we thought they were even as short a time ago as one month. >> hugo, one quick thought. the barclays said the near 8 billion they took, i think it was, it's going to have no impact on bonuses. that shows you how much the private has changed, they feel compelled to make that statement at the outset. >> preemptively they're trying to head off the criticism that you'll see at the end of the year if barclays makes big profits and they say, aha, look, they've given all these bonuses to staff and it is all just because the ecb bailed them out. now what they've done, it's quite clever, they're going to
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sequester the profits from this particular borrowing and not put that into the bonus pool but what they're not say iing is they're going to do anything with all of the other profits they're making just because this huge $1 trillion euro operation lass stocks and bonds and all of the banks will have had a fantastic first quarter so far. and so at the end of the year it will be possible to criticize the bankers and say, look, you were bailed out and you've paid back bonuses to your staff. i don't think that argument has gone away despite this attempt to head it off. >> you raised the point they had a first quarter. hugo, good to see you. zane sticks around for mreplent more. jackie, what else is coming up? treasury secretary -- san francisco president john williams says it's encouraging that the u.s. economy has been showing signs of improvement and there's a sense of optimism out
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there. but he says that the rebound has been anemic and further fed stimulus may be necessary. now williams, of course, who is a voter of the fomc this year says qe is definitely not off the table and buying more mortgaged backed securities would be the best course of action. treasury secretary tim geithner is defending measures he and the government took during the financial crisis. a "wall street journal" op-ed piece, late night phone calls he got from several panicked bank ceos, says dodd frank could have helped limit the damage to the economy if they existed back then. critics are suffering from amnesia and forgotten how close the u.s. came to financial collapse. and of course still to come on the show, ross, some of the biggest movers and shakers are discussing the latest and greatest ideas and what's next to come at the world renowned conference. we're going to talk with one attendee, a top ad in the media space when we come back in a flash. stay with us. carfirmation.
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good morning and welcome back. voters head to the polls in iran today in a parliamentary election which marks the first nationwide vote since june of 2009. competition for more representation in parliament fought between supporters and the current president and those of the supreme leader as well in terms of the united front.
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nymex has retreated from $110 a barrel after sources told cnbc that reports of an oil pipeline attack were untrue. saudi arabia rejected the iranian report of a pipeline explosion saying it was completely false. this comes as u.s. energy secretary steven shu said oil producers have sufficient spare capacity to make up for the lack of oil due to sanctions we're seeing. still with it is zane brown at lord abbett. zane, let's talk about oil a little bit. really interesting stats here. crude oil futures up 47% since hitting a one-year low back in october. since then the s&p energy sector up 27% and 14 energy companies are up over 40% during this weird. while the high oil prices will have an impact, of course, globally on some companies, the energy companies certainly are profiting. do you think we're sort of at a peak here in terms of the geopolitical risk with how high
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oil can go? >> well, actually not. certainly with the tensions in the middle east if something were to happen in the straits of hormuz that could top oil well above $150 on a short-term basis and that, of course, could cause serious impact to the price of gasoline here and if we do get the $5 a gallon here, i think that would impact consumers spending patterns. >> a potential to go to $150, we certainly know that's on the table. i agree with you there. at the same time isn't that really speculation driven, because even if there was a problem in the strait of hormuz and there was a problem with iran, we still have the capacity and the supply globally to make up for that, don't we? >> well, we hope that we do. i think it takes a while for that to get online, and if you close off the strait of hormuz, now, all of a sudden, oil can't go one way or the other. and even if we do end up with our military or ships saying,
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oh, it's safe, you'll have ensurers saying, oh, we're not going to ensure you so we don't want to touch it and that could cause longer term supply interruptions even though the production capability is there. >> right. >> i just want to point out, by the way, petrol and diesel prices, you would wins at the amount we have to pay but it's somewhere up around $12 equivalent for a gallon. zane, where is the real pressure point in terms of gasoline prices there when investors are going to start really taking notice in terms of pricing down or marking down assets? >> i think something along the lines of 4dz.50 in the u.s. even though arguments have been made, hey, we've had a mild winter here. gas, natural gas is so much lower and fuel costs for heating have been so low so that consumers are better off i don't think psychologically. consumers respond to that. instead they respond to how much
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they paid this week to fill their tank and i think that influences how much they spend on other goods during the week. >> we'll have to leave it there and the discussion of oil. thank you, zane. he will stay with us. but coming up on the program, a noted market maven makes a huge call in the s&p is 500. he sees a 24% move up by the end of the year. we're going to put his theory to the test up next.
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good morning and welcome to the show. the headlines today from around the globe, in the united states tim geithner goes on the defense saying critics of financial reforms and bailouts are suffering from financial crisis amnesia. in europe banks have a record 775 billion euros despite president mario draghi's insistence that rto money will flow into the real economy. and putin's confidence, assures the support of voters despite recent uprisings. debt measures are start to go pay off. they fall in 2011 but gdp growth slows as austerity bites into the economy. good morning. nice to have you here on
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"worldwide exchange." it's 5:30 a.m. on the u.s. east coast. let's take a look at futures and see how we're poised for trade on wall street. it does look like we'll be slightly lower at the open this morning. the dow could be lower by 6.3 points. the nasdaq lower by 3 1/2 and the s&p is 500 lower by half a point there and, of course, this was after a strong day in the markets yesterday, an up day. we saw the nasdaq and the s&p 500 hitting new 52-week highs. on the dow we saw jpmorgan, ibm and american express, the top three performers there so definitely seeing more risk on the table with the financials. we saw the consumer lagging. >> european stocks ahead of the u.s. open after good gains yesterday, 1% to 1.5%. we're pretty flat right now. the ftse mib is doing very well. the bond yields in italy and spain have continued to decline, both the ten-year btp and spanish debt trading below 5% and two-year italian btp, the
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first time we've been down there in around months, jackie. that's all fairly supportive. one thing about the italian budget numbers today. the public debt, 120.1% of gdp was bigger than 2010. but better than originally forecast. >> all right, fair enough. thanks for that,s ross. the s&p 500 has had an impressive first two months of 2012 but one market watcher sees even greater gains for the benchmark intex. they say the s&p could spike to 1700 this year, a 24 mers rally. equities have been in the third quarter of the bull market since last summer, in fact. joining us to talk more is todd horowicz and zane brown as well. when we look at the s&p right now from a technical standpoint, do you think that 1700 is possible? >> first of all, good morning. thanks for having me on. is it possible? of course it's possible. i would like to see them get to
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1,400 first and then i can get to 1,700. there's a lot of resistance. could could it happen? of course it can happen. i do not see it and i think that's more or less an irresponsible projection going through. i don't see how it can get to 1700 this year. >> okay. so you and i are on the same page there especially because we see the indices while they're performing well, they're very range bound at the moment. do you expect to continue to see that range bound activity as we move forward? we're up a little bit one day and then we're down and we correct the next day, that kind of thing of moving become and forth? >> i think that's 100% correct. i think what you are seeing, we are working our way higher so there's no doubt that the near term trend is higher but we're having trouble getting up to the top of these levels and we're pulling back a little bit. i think that looks to continue to be the action. we look to be in what we call a consolidation phase. continue to move up. you can see the markets are getting very tired. one of the things you want to look at now is everything is now
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priced for perfection. we've gone through the earnings season. we've gone through all these reports. but you see now when the reports are not exact ly perfect and thy don't knock the cover off the ball we get a sell-off. that's what we have here. i think the market needs a good, solid rest here and this is going to continue for at least the next four, five, or six weeks until we get some pullback in the market and then allow ourselves to spring back forward. >> okay 0. and it's early in the year certainly to have market fatigue. we're only just in march right now. so it's going to be interesting where we go from here but, zane, i want to bring you in and get your thoughts on bernanke. we saw after the ltro 2 came out a pop in the markets be a then what bernanke didn't say drove the markets down a little bit. now we're hearing maybe we overreacted to this. how do you feel about that? >> i think it was an overreaction and i think the right reaction to what bernanke said was that maybe there's no longer a need for additional quantitative easing and that
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ltro does take away some of the risks that europe presented so unlike todd perhaps our perspective may be that we do have room for improvement here without a correction going forward. i'm not sure what your perception of that is. if you look at bernanke's comments a little bit differently or not. >> i look at baek's comments as just what they were. you look at the markets that were affected the most dramatic was the gold market. really gold was at the upper end of the range and a sell-off was naturally due. i mean, can we work our way through everything and would you go higher? sure. i'm not looking for anything major. i'm not bearish the market. i'm not looking for new lows. i think for the health and the wealth of the market we could use a little bit of a pullback but certainly it wouldn't surprise me if we hung around here, move a little bit higher and work their way up you. the first target i would look for would be like 1435.
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>> it's ross here. can i speak up on the gold comment, do you think that's based on the fact that the fed isn't doing more qe they don't perceive more inflation risk and if you're going to buy gold, it's bettory bide it for the deflation risk than the inflation risk. you can put your money in stock. gold fell because those who were buying it for deflation saw less of a reason to do so. >> i think we had a lot of people that were speculating and if you look at a chart, 1800 was a great level to take a shot. we had little selling pressure. what bernanke didn't say and all of a sudden it's like pouring gas on the fire and everybody ran for the exits. we had an overdramatic move of $100 downward in gold which subsequently rallied back a little bit yesterday. that was a real good technical
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level to take a shot at selling gold. all right. we'll have to leave it there for the moment. i want to switch gears for a moment. ipo at $15 a share was above the estimated range. the offering values local business review website at about $900 million. it isn't profitable and warns that it may never be. it generates most of its revenue from online advertising. they will begin trading on the new york stock exchange. zynga wants a little separation from facebook. they are launching a new service to let users play on its website instead of facebook. it won't be divorcing itself is completely. users still need to log in with their facebook id and sales of virtual goods will be with credits. we saw zynga jump 10% on the news thursday. let me come back to you, talk about the internet stocks and some of the news we just went over there.
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your take on the ipo and tell me what you think about zynga. >> you know, i think zynga is like the last couple of groups. i'm not a big fan a. i don't know that it has a big potential here. it's probably more of a nondescript stock. i'm not impressed and i wouldn't be involved in it. >> okay. and yelp, talking about a $900 million company that doesn't generate profit. how could we substantiate that price? >> this has a little bit of sentiments of the 1990s. i have no idea. i don't know how they could possibly price it there. they've already said it could never make money. how is it going to pay it back. it's another one that, those are things to me that just -- they make you kind of go, hmm. what's going on here? so i don't really understand how they even came up with a number up there.
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they're never going to make money in my opinion. >> okay. fair enough. thank you so much to todd horowicz and, of course, our guest host zane brown, who is going to stay with us. they're both going to stay with us as well. and still to come on the show russian president putin tells reporters he is happy about recent protests against him but assures he still has the backing as voters get set to head to the polls on sunday. we're live in moscow next. nal h? aren't you getting a little industrial? okay, there's enough energy right here in america. yeah, over 100 years worth. okay, so you mean you just ignore the environment. actually, it's cleaner. and, it provides jobs. and it helps our economy. okay, i'm listening. [announcer] at conoco phillips we're helping power america's economy with cleaner affordable natural gas... more jobs, less emissions, a good answer for everyone. so, by reducing the impact of production... and protecting our land and water... i might get a job once we graduate.
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eu leaders have signed the fiscal treaty which sets strict new limits on deficit and debt. silvia is in brussels with that treaty was signed. for once it wasn't a crucial lifesaving summit so slightly more relaxed for you. where does this leave us now particularly on a day when we've seen spanish unemployment increasing at 50% and they want higher deficits. >> reporter: you're quite right. we weren't quite in panic mode and everyone to the life boats, women and children first. i saw somebody on twitter saying the signing of the treaty not exciting, yes, but also said
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beware for things that are not exciting in europe are usually the ones that are really important. so this fiscal compact is importa important. it's not important for the time being or for the moment. it's not a life changer, as it were, but it lays down the groundwork for the stronger fiscal consolidation and coordination if everybody sticks to it and that is what they profess to be doing. we know very well that the first time we had something like a fiscal compact, ie the market stability, it didn't quite work especially with the germans and the french making it back for the first time. now, of course, we see the shift from austerity not quite shifting back to growth but certainly growth and employment and trying to work out growth and employment back on the agenda, the difficult task is how to get there, how to free money for a possible stimulus, how to free money for getting employment back on track and spain, of course, is in the forefront of these troubles with the spanish unemployment numbers out this morning.
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also spain already saying the deficit target for 2012 is ambitious. we might need some adjustments to the goals that have been set. it will be a very difficult goal post to move because obviously that's the first one after the fiscal compact was agreed that has to go through legislation of the various countries, of course, and it will be a bit of a test case. the president of the leader and head of the euro group of new leaders, as it were, and some of the other european leaders have said we will be taken by our word. the first time we have a test case, the target is already blown, that doesn't bode well for confidence. it's going to be a tricky one and on a curiosity note, remember the dutch and holland and the netherlands pushing very much for austerity and sticking to the rules and you must stick to the rules. well, low an and behold the du
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have their own little problem because they're going to blow the deficit is target probably by a percent and a half this year. >> yes. we'll see what they say about that one. silvia, good to see you. thank you very much indeed for that. from brussels to moscow, russian president vladimir putin has told reporters he's happy about recent protests but assures he still has the people's support as voters get set to head to the polls on sunday. steve is reminiscing about old times there in moscow and joins us now. steve, they like to do things backwards in russia because normally you would face down your opponents before an election, get a mandate and govern happily. we know putin is going to win this election and then he will have to deal with his opponents. how is that going to pan out? >> reporter: yeah, that's the right way to put it, ross. the question is not if there's going to be change but when and how much. by the way, we understand the
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opposition is planning a rather large protest for monday in moscow after the election. the pressure will be on him. my understanding is december was a huge wake-up call for the kremlin. they didn't know that this opposition was simmering below the surface t. began in september. not only when putin and medvedev announced he was running for the presidency again, outraged some people. the real outrage was they decided it four years ago. and that's part of the operation which has to do with the government really taking the reins in both politics and business in its own hands. >> yeah, and, steve, putin has promised what a lot of politicians do, he's going to try to buy the people off. he's made extravagant statements for doctors and armed forces. is it going to work and can
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russia afford it? i know oil prices are getting higher. how does that work? >> reporter: yeah, well, two separate things. he's been out there promising and i just spoke this morning with the head of one of russia's biggest investment banks and he thinks gdp will be higher this year because he thinks most economists are underestimating how much government spending there's going to be. look, they have a huge treasure troef from all the money coming in, putin nationalized it. a lot went to his buddies out there and the billionaires. there is a lot left over for the government and government spend ing projects and those should go full force. about oil prices bottom line is he needs a high oil price. a lot of russians think he's been responsible for an economic miracle, a lot of economists say, you know what, putin has been riding higher oil prices and that's filtered down to the average people in russia. >> just looking at he's got this rise, 40% of gdp, public
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spending quite high for middle income countries, steve. are there any concerns that will get ratcheted up quite a bit more? >> reporter: i think that's right. but, remember, he has this $90 billion reserve fund they put together and one of the things they are trying to do, ross, as you know is keep it from depreciating too much. that will hurt domestic export ers as well. that's the dutch disease problem russia suffers from more than many countries. and really it's helped them. he's let enough money filter down to average people, and that's what has helped him but it's also hurt him in the sense that now about 50% of russians, ross, consider themselves to be members of the middle class. and that means they are demanding more political voice and they are more concerned about the corruption in the government. >> all right and, steve, you came out with one great stat the last time around. if he's re-elected now, how long
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could he be in power for potentially? >> reporter: so i think it's 25 years. i'll go back and do my math again. if he does six years and the next sixth one he will have been in office longer than stalin in russia. >> that's a thought. steve, good stuff. catch you later. steve on cnbc throughout the day reporting interest moscow. jackie? coming up next on the show, we're going to look ahead at the trading day on wall street. will the u.s. markets end the week on a positive note? stay with us.
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good morning and welcome back to the show. if we opened now the dow would be lower by 17.3. the s&p 500 by just about two points. but, of course, it's still early and things could turn around. to talk about the day on wall street the chief strategist and our guest host zane brown, chief fixed income strategist at lord abbett. todd, i want to start with you. we were talking about data before. you said we will have to see really good data to break through some of the technical levels. but at the same time we have seen encouraging numbers. we have the auto sales out that were positive, same store sales as well. retail seems to be in good shape and we saw the gdp revision. isn't that enough for this market? >> no. i shouldn't say it so quickly. we've already priced in it -- a lot of that has been price d in. remember, we're up 30% from october 4th basically. so we've had a dramatic move going forward. now we have to sustain these
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moves and sustain these numbers. one, two, or three months don't tell the overall story. so can we get these numbers? sure. can we push our way forward? sure. i think my personal thing i'm looking at we've made some new highs in the indexes but take a look at the russell, the small caps. they are struggling up here. that's an indication to me that there's divergence in the market, maybe the market is starting to peak out a little bit here. >> okay. and let's talk about next friday's unemployment report? any chance we'll see a down tick again? >> i think we're going to see a continued improvement there again. i think that we are -- the trend in unemployment is better. it's kind of a tricky number because the headline number is really, you know, they come out and say 8.or 8.5 but we're going to continue to improvement. i don't think it's enough to make a dent yet but we're moving in the right direction.
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>> okay. certainly that's a positive sign. speaking of the data that we saw in terms of retail at least specifically, the weather has had a really impact. could this sort of be a blip in the radar, something that is e potentially solid, not something we can dig our heels in to say sales are improving but just a factor, an outside factor. >> that could have characterized december and january. here we are now at the beginning of march, and we hear that people are going out, buying spring clothes, and they're paying full price. so it's good for retailer margins. when retailers look at march and this turn to early spring weather, it's really going to help out not only sales but profitability and margins as well. >> okay. and i am one of those people wishing spring to come by buying the clothes early. somehow every year i think it's going to make a difference. i want to shift our focus and talk briefly about bonds. we've seen a lot of shift in
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terms of asset allocation into the fixed income market. we do know that retail investors are out of the equity market. there's a little fear still left there. are they pouring into the bond market and with yields where they are, is that really a wise thing to do? >> they have been pouring into the bond market. they've been withdrawing money all throughout last year from the equity market. january, the latest month we have figures for, was neutral on equities so maybe they'll start going back in. to your point, we have yields on high quality securities, aaa and government securities down very low but there still are some great opportunities if you take on a little risk. that's what retail investors have been willing to do. they don't want the risk of the stock market, of high yield. they don't want the risk of securities and those are the area there is still significant value. >> okay. all right. and i want to bring todd back in and talk about some of the sector strength that we've seen as well and i want to talk about the energy markets, specifically the rising oil prices that we've
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seen as of late. we've seen the energy stocks soar as a result of this. would you continue to be in energy? >> i think you have to be very careful in the energy secotor. there's a big -- there's a huge fear premium in what's going on this the mideast and so on and i think that's going to resolve itself. it always does. we've seen this movie before. you can go back to the libya crisis of a year ago. this will resolve itself and i think you're building too much of a fear premium into these and i would look for a spot to be a seller. i think we have an even money chance to get the old high of 113 or 114 but i look to be a seller. >> thank you todd horowicz and zane brown. we appreciate your insights and that just about wraps it up for "worldwide exchange" and for the week for us here. i'm jackie deangelis in the united states. >> i'm ross west dwat here in europe. coming up next "squawk box," of course, as we continue the countdown to the opening of markets state side. whatever happens we hope you
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have a profitable day.
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good morning. reassurance from the saudis. they say there was no fire in its pipeline and crude prices are pulling back as a result. has the world forgotten? tim geithner says some people seem to be suffering from financial crisis amnesia and that could spell trouble for the future. it's friday, march 2, 2012, and "squawk box" begins right now. ♪ pick me up from the bougttom up to the top love every day ♪ ♪ pay

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